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The Elusive Truth About Chuckanut Ridge/Fairhaven Highlands

Sat, Dec 05, 2009, 9:00 am //Tip Johnson

I always hate public issues that involve decades of history and require integration of multiple points. I refer to it as 'the indignity of explanation.' Public interest advocates gain nothing easily when unconcerned officials and interested parties merely listen patiently and do nothing. But here we go again.

Citizens dismayed with the irresponsible behavior of City of Bellingham officials over the years regarding the monstrous development proposed by the endangered Horizon Bank may now have a glimmer of hope, or two. Hope has been difficult to sustain amidst the apparent corruption that has followed this bizarre case of fraudulent entitlements.

First came consolidation of the property under a blind Delaware corporation, West Eden Development, officed in Lynden. Confidential statements from interviews while researching the history have alluded to the involvement of local elected officials of the time. Neither the State of Delaware nor the registered agent for the now defunct corporation (still owing back taxes) will comment on the corporate principals. A subpoena pursuant to a criminal investigation is required to obtain any information about corporations in Delaware.

Preceding this, a well known elected official with insider information on the proposed alignment of Valley Parkway had consolidated land along the route of what is now Old Fairhaven Parkway, an extension of State Route 11 - Chuckanut Drive. He did very well for himself with those investments. Some have speculated that anyone - say sitting on the Legislature's transportation committee and having already exploited the highway route - would have perfect knowledge of the inadequacies of the Chuckanut Drive bridge over Padden Creek and thoroughly understand the desirability of a highway diversion through the Fairhaven Highlands property. On a map of the time, it must have looked perfect. But I'll bet no one walked the property. They would have needed good galoshes!

On the heels of the property consolidation came the phony rezone in 1981, wherein the Chuckanut Drive diversion, or improvements to the bridge, became "prerequisite conditions" for development. The density was given to make those improvements economically feasible during development. This is not a valid basis for zoning, and occurred without the procedure common to major rezones, much less highway revisions. It was later described by former senior city planner, Chris Spens, as a "mystery at best." The corrollary question follows: What might it be at its worst?

Immediately upon adoption of the zoning, the property was sold to a local developer and the Delaware corporation abandoned. When the first iteration of the project appeared in 1995, the absurdity led it to become the poster child for our Greenways levy. The levy passed but acquisition never occurred. Citizen outrage should rightly have led to a reexamination of the zoning, but the city never took action. For a variety of reasons, the proposal died enroute to its permits and re-submerged, creating a measure of complacency among citizens and officials alike.

Along the way, then-mayor Mark Asmundson, took it upon himself to administratively adjust the project density through a Memorandum of Agreement with the owner. This occurred concomitant with a conveyance/reconveyance scheme that moved the site's largest wetlands into city ownership via the Whatcom County Land Trust, resulting in a multi-million dollar tax benefit to the owner. Even though the number of units was reduced, the method also avoided the comprehensive review and public participation normally required for zoning. The Growth Management Hearings Board has ruled this procedure improper. This is the so-called zoning in effect today.

Meanwhile, everyone was learning more about how important wetlands are to the health of Puget Sound. More stringent critical areas regulations were being drafted and discussed. This and other Growth Management issues boggled the city long enough that the State threatened the city with sanctions if a new comprehensive plan was not adopted.

On the very eve of adopting new critical areas regulations based upon best science, the disastrous proposal was resubmitted. It was a hasty proposal, full of defects and lacking crucial elements. It was nevertheless somehow determined to be "substantially complete" by city planners within a few days of receipt. At that time, the project lead for the Planning Department was married to a construction manager employed by the developer. The city's most immediate prior determination of completeness was for a small addition to an existing South Hill home and took six months. Yet the largest development proposal in Bellingham's history, proposed in one of the most sensitive wetland areas in the city, already subject to controversy years earlier, happened in only days. Citizens filed an appeal which the city rejected. The proponent asserted that this tricky move had "vested" their rights under the old regulations. Now, the newly released Draft Environmental Impact Statement (DEIS) recommends newer alternatives by detailing the deficiencies of the original application. How could it have been complete?

Finally comes the debacle of possibly the worst impact statement ever written. After selecting the proponent's preferred consultant at half the projected cost of the next nearest bid, planners joined with the developer to devise a set of several alternatives with mainly insignificant differences. Not one fully complies with the prerequisite conditions or even the outdated wetland regulations. Virtually every citizen scoping request was ignored to produce a shamefully deficient document that bends over backward to meet the proponent's objectives and hides the extent of impacts amidst a welter of meaningless miscellany - the proverbial needle in a haystack. Citizens were given three weeks to read over 500 pages of obfuscation, subterfuge and outright dissemblance. Impact statements are legally required to be "concise" and usually limited to 150 pages. Not this one.

This is occurring under the direction of Bellingham Planning Director, Tim Stewart, at a time when citizens are learning he is no stranger to such controversy, and is unafraid to ride roughshod over citizens or the environment to accommodate large developments. Stewart's arrival in Bellingham was preceded by a scandal in nearby Shoreline involving a large corporate development and another salmon stream. According to reports, Stewart changed regulations, recommended variances and falsified an affidavit in order to assist in the approval of a project largely within protected wetland buffers along Thornton Creek. A now famous documentary, "Up Thornton Creek" details Stewart's adroit rule changing and application management, demonstrating his predilection for private property values over environmental or community values. Citizens were sued for slander and the City even threatened the homes of vocal activists. See for yourself (25 minute video).

So what about the hope? Well, one glimmer is that the bank is teetering on the brink of ruin and probably can't develop the proposal. Also, the FDIC has enjoined them from participation in multiple-family housing development. They could probably figure a creative way to pass the multi-unit portion of the project on to their construction partner. More likely, they will try to sell it once the permits are in place, much the way the blind Delaware corporation sold it as soon as the zoning was in place. However, this is a difficult project. It is mired in controversy and could be a difficult sell under the assumptions of the past. Environmental constraints loom large for the project as proposed, but it may be feasible to build some number of homes, particularly in the southwest quadrant. This is a flickering glimmer with risks.

The brightest glimmer for citizens, and their best hope lies, ironically, with the Draft Environmental Impact Statement. As poorly written, badly organized, pointedly biased and incompetent as it proves under analysis, it does irrefutably accomplish one very important milestone: it establishes the utter absurdity of this scale of project in this location. Even varnished with the proponent's best finish - literally plastered with lipstick - it is obviously, categorically, an impossible, ruinous project. Steep slopes are to be blasted away. Roads on twenty foot fills with retaining walls are required to access the property. Wetlands are proposed to be filled and buffers violated. Stormwater will be piped to flood the forest floor, weakening trees and altering hydrology in critical wetlands. The project will use public resources, full of salmon and freshwater shrimp, as a storm sewer - utilizing technology already proven inadequate.

Remember Mayor Asmundson administratively negotiating the current density by contract with the owner? O.K., that's not a proper method of zoning and is likely itself subject to challenge. But the main point is that the density was reduced by half. Think of it! If the project looks stupidly impossible now, just imagine it at twice the density! The DEIS unequivocally establishes that a zoning error occurred in 1981. No one could possibly have evaluated the actual property, much less considered the policy framework of the city and neighborhood, to conclude this level of density meets the public's interests or is in any way appropriate within this sensitive environmental feature. That review, normally required for zoning, has never been done.

Now the developer is even trying to welsh on the prerequisite conditions. In a last minute comment on the DEIS, they have asserted that their "scientific traffic study determines that neither the connector nor the widening of the bridge is necessary," that "not only does the Director have authority to determine that the prerequisite conditions are inapplicable to the development," but that "he also can only impose the conditions if they are found to be commensurate with the impacts." In a masterful grab, they complain that "the prerequisite conditions were imposed without the benefit of a transportation study," but seem singularly unconcerned that the zoning was similarly imposed, along with the prerequisite conditions, also without benefit of study. In fact, the record reflects the city's interest in achieving the prerequisite conditions was the only basis for the zoning.

So whose job is it to correct zoning errors, to adopt zoning in the best interests of the community as a whole, and to adequately condition new developments consistent with those interests? The City Council - not the Mayor or the Planning Department - is statutorily responsible. One problem is that over the years, the Council has delegated much of their authority to the Planning Director and Hearing Examiner. This has streamlined the review process and allowed Council to focus on policy issues, but has also somewhat limited citizen access to elected officials for relief from nonsense like this proposal. Nevertheless, the ultimate authority remains the Council's.

But can citizens, having battled this scourge since 1995, rely on the Council for help? How can citizens escape the dilemma of either subsidizing a failing bank with millions toward an outrageously inflated purchase price, or subsidizing the development with millions in public services, infrastructure, lost opportunity, destroyed resources and degraded quality of life? Past efforts have fallen upon deaf ears.

The DEIS, perhaps unintentionally, has finally zeroed in on a set of serious policy issues for which the Council is the only legitimate venue. Public comments have intentionally added a laser quality to this focus. Combined with concerns over potential bias from the Planning Director, Council's attention is ever more appropriate. Remarkably, even the developer has asked that testimony regarding "the sequence of events which produced the now nearly 30-year old comprehensive plan and zoning" should be "verified for accuracy as well as relevancy." I agree. The preposterous level of damage this project could inflict argues strongly in favor of such a review. The developer even offers to help. No thanks. The Council is the only body capable of adequately representing citizens' interests in this review.

The Council would do city taxpayers a valuable service by assuring development is not based on planning errors, that zoning is consistent with the city's overall policy framework and not a real estate game designed to enrich a few at a cost to all. Now that the developer has made it clear they will oppose the prerequisite conditions, what on earth has the city to gain from this development? It has become a classic bait and switch, a quid sans quo, but one with enormous risks to the community and environment.

The truth is that this has never been a rational development proposal founded in comprehensive planning designed to benefit and improve the community. History suggests and the DEIS proves: It's something much worse. Turning a blind eye and pretending to follow normal procedure is simply not enough. It's time again we asked our elected representatives to please help.

Larry Horowitz //Sat, Dec 05, 2009, 8:38 pm

Tip,

Based on the lack of comments, it must appear to NWC readers that you and I are the only ones concerned about these issues. I don’t know about you, but every time I post a story, I receive numerous emails and calls thanking me for shining the light where darkness prevails. I’m not exactly sure why so few comment on our stories, but I know they are widely read and supported.

You have indicated that Its time again we asked our elected officials to please help. I agree. One week ago, on Nov 28, I was prompted by the second landslide on Chuckanut Drive in a week to send an email to each member of City Council and the two newly elected Council members. In my email, I asked Council to intervene on the publics behalf and require the city to enforce the CAO. The Draft EIS confirms that the CAO?s unique safeguards are needed to protect the public from injury, loss of life, and property damage due to landslides, steep slope failures, erosion, earthquakes and flooding.

Of the seven Council members, I heard back from just one. The response: Council has been advised by the city attorney not to discuss this matter with the public because Fairhaven Highlands may become a quasi-judicial issue, and I don’t want to be part of any ex-parte communications.

Unfortunately for the public (and for members of Council), the city attorneys interpretation of the appearance of fairness doctrine is inconsistent with WA case law, which is quite clear: The appearance of fairness doctrine and the rules governing ex-parte communications are not relevant to Council until the matter is actually pending before Council. According to case law, the Fairhaven Highlands matter will not be pending before Council until an appeal is filed that would bring the issue before Council. That cannot happen until permits are issued and the permit decision is first appealed to the Hearing Examiner. At the earliest, that won’t occur for quite some time, perhaps as long as a year from now.

In the meantime, the city attorney’s advice has illegally denied citizen?s access to our elected representatives, violating a key tenet of all democracies.

So, Tip, please excuse me if I don’t hold my breath waiting for our elected officials to help. While help would be greatly appreciated, I have learned not to expect it from city officials.

Perhaps the newly elected Council members will prove me wrong. In this case, nobody would be happier to be wrong than me.

Tip Johnson //Sat, Dec 05, 2009, 10:08 pm

Hi Larry,

I believe you are correct that until the matter is before the Council, there is no ?appearance of fairness? constraint on discussion.

However, the use of the term ?quasi-judicial? sounds optimistic to me. If only ?judicial? had been used, I would understand it much more pessimistically. Waiting around for judicial action is just more of the same inaction and eventually saddles the public with the costs.

Quasi-judicial action is exactly what we want from the council. When push comes to shove, it?s why we elected them and pay them. I would hope that the verbiage indicates that there may have already been some movement among the Council toward a quasi-judicial review of the application. Certainly the spectacle of the DEIS may have stimulated at least some Council members into thinking toward that end.

It would significantly demonstrate taking their statutory charge and oath of office seriously.

I strongly encourage that, as everyone should!

Larry Horowitz //Sat, Dec 05, 2009, 10:29 pm

The term “quasi-judicial” as used in this context is appropriate. It refers to a non-court hearing before government decision-makers who are not actual judges. The appearance of fairness doctrine “requires government decision-makers to conduct non-court hearings and proceedings in a way that is fair and unbiased in both appearance and fact,” including the avoidance of ex-parte communications.

The key is that this statutory doctrine applies only to quasi-judicial land use actions that are actually pending. “If a matter would come before council ONLY by appeal from a decision by the hearing examiner or planning commission, it is NOT considered pending with respect to city council members until an appeal is filed.”

Therefore, the Fairhaven Highlands issue is not pending before Council at this time, and won’t be until:

The EIS is finalized;
The Planning Commission conducts its own hearing;
The Planning Dept makes a permit decision;
An appeal is heard by the hearing examiner; and
The hearing examiner’s decision is appealed to Council.

That process will take a long time, perhaps as long as a year.

In the meantime, at least one Council member has refused public access based on the city attorney’s advice. I believe the denial of public access to Council at this time is illegal.

Here’s a link to info from the MRSC on the Appearance of Fairness Doctrine:
Note: link temporarily down as it is corrected.

David Camp //Sun, Dec 06, 2009, 12:09 pm

Gents,

Lack of comments? My theory: If you have apples to polish at City Hall, or WWU, or County Planning Dept., or any other of the powers that be in B’ham (which is a pretty small place), why comment under your own name on a contentious issue that will gain you scant favor and probably make you an enemy or two?

On the issue of Fairhaven Highlands, City Council is suffering from Neuterosis Legalitis, the symptoms of which are unfounded fear of liability based on the advice of self-serving rule-bound hacks, resulting in abdication of responsibility into complete inertness. In the vernacular, it’s known as henny-penny syndrome.

I think a very interesting thing to pay attention to over the coming months is who ends up with Horizon’s interest in the Fairhaven Highlands when the bank is inevitably wound up/merged/sold. I would be very surprised if negotiations were not ongoing.

The vultures are circling.

Larry Horowitz //Sun, Dec 06, 2009, 1:42 pm

Dave,

Thanks for taking time to comment. I absolutely agree with your observation regarding Council?s abdication of responsibility. I wonder, which character are you in the Henny Penny story? Cocky Locky, Ducky Lucky, Goosey Loosey, Turkey Lurkey or Foxy Loxy?

As far as Chuckanut Ridge?s final destination, no doubt the vultures are circling and negotiations are ongoing. But it?s a complicated mess to unravel.

According to Horizon Bank?s financial disclosures to the SEC, the property is owned by Greenbriar Northwest (GBNW), a joint venture between the bank and David Edelstein?s Greenbriar Construction Company. GBNW owes the bank more than $24 million on a piece of land that?s worth less than $5 mil. Could their position be any more under water?

Horizon Bank?s 0.8% Tier 1 leverage ratio is so low that Horizon is now the 4th most undercapitalized bank in the US still operating ? clearly very high on the FDIC watch list. If (when?) the FDIC chooses to close the bank, the successor bank will treat Chuckanut Ridge like a hot potato and will have nothing to do with it.

More than likely, the FDIC will add Chuckanut Ridge to its growing inventory of unwanted properties and will take ownership of the $24 million loan owed by GBNW. I suspect Edelstein will finally make good on his year-old threat to place GBNW into bankruptcy. No way is he going to pay his $12 million share of this loan.

IMO, when all is said-and-done, the FDIC will either auction Chuckanut Ridge for pennies on the dollar or will try to negotiate a direct sale to anyone still interested. Who might that be? Are there any developers foolish enough to acquire this tainted land? Where will they get financing? How much would they be willing to pay given the environmental risks involved and the entrenched opposition?

I can almost sense the price falling as we speak.

Thanks again for commenting. Best wishes as you polish your apples! It certainly takes courage to take a stand in Bellingham.

BTW, here?s a link to an updated list of the most undercapitalized banks in the US based on the Sep 30 Tier 1 leverage ratios. Horizon was 7th initially, but 3 of the top 7 have already been shuttered.

David Camp //Sun, Dec 06, 2009, 2:03 pm

Tip,

A agree that the Fairhaven Highlands property value is falling fast - it may reach the level at which it makes sense to buy it with public funds. I mean, not a sweetheart deal designed to transfer the maximum amount of public treasure into private hands, but rather the smart use of public leverage to buy a distressed asset cheaply whose highest and best use is as a public park. $5 million? I think a better deal would be to have the owners donate it to the City and get a tax write-off. Not that they need one as they bathe in red ink - the wages of the sin of GREED.

And as to which of the mythical characters is my avatar, I do have a shrine to Ducky Lucky in my yard, but that’s more an expression of hope and praise than anything. Sometimes I feel like Henny Penny - especially with regards to the federal government.

Om Namah Shivaya! And Happy Christmas.

Larry Horowitz //Sun, Dec 06, 2009, 2:24 pm

David,

Larry here (again).

Ducky Lucky’s a good choice, although I believe most have us are on our way to becoming Henny Penny-esque, running as fast as we can to the safety of our own yards and never telling the king that the sky is falling.

I suspect that Foxy Loxy must have a law degree.

As you probably know better than most, Horizon Bank would have well served to invest in gold rather than land. At least their greed would have been handsomely rewarded. (Although Friday was not particularly rewarding for “goldies”. Probably a small Fibonacci retracement on its way to higher returns.)

Best,
Larry

David Camp //Mon, Dec 07, 2009, 4:02 pm

Larry,

Gold is solid money where what passes for money is being deliberately devalued.

But I’ve always had an ideological aversion to using gold as other than a temporary store of value, or a hedge against central banks’ shenanigans. Real value is only in real assets that produce real goods - land, livestock, productive assets like manufacturing equipment, and that most important valuable thing - human hands and minds and hearts that learn and transform and work.

The love of money is the root of all evil, said some wise person.

Emily Linroth //Wed, Dec 09, 2009, 4:13 am

Hello all,

As Larry said, thank you for shining light on this issue. Tip, would you be interested in having this piece run in the January issue of Whatcom Watch, which we’re putting together now? Some of our readers who might jump on this issue do not have regular Internet access, and it would be great to spread the word.